The America’s Cup competition is one of the most prestigious sailing
competitions in the world. Under the rules of the competition, the current
Champion yacht club must agree to the rules and conditions of the next
competition with a Challenger yacht club that issues a formal challenge.
GGYC is the current champion and the formal Challenger is a club known
as CNR. GGYC is responsible for much of the administrative work involved
in setting up the next America’s Cup competition. One of those responsibilities
includes setting criteria for the inclusion of other challenging yacht
clubs besides CNR, criteria that must be developed with CNR’s input.

One such other challenging club is the African Diaspora Maritime Corporation
(ADM). GGYC posted the “Protocol governing the 34th America’s
Cup” and ADM attempted to submit an application, pursuant to GGYC’s
stated guidelines, to enter the competition. When GGYC rejected ADM’s
application, ADM sued.

Breach of Contract Claims

In previous posts we have discussed breach of contract cases that have
occurred “downstream” (ie after the contract was entered into
by both parties) cases that involved certain actions that may have breached
the contract.

One of the fundamental questions in any breach of contract case is, “did
a valid contract exist?” In the previous cases, both sides agreed
that a valid contract existed. Here, the dispute hinges on whether a contract
between GGYC and ADM existed at all.

For a valid contract to exist, there must be both an offer and an acceptance.
These two elements, in whatever form they take, indicate that both sides
mutually agreed to be bound to the deal.

Here, GGYC wanted the case to be dismissed for failure to state a valid
claim. They were in effect arguing that a valid contract never existed
between them and ADM because there was never a valid offer and acceptance.

The “Protocol”

GGYC’s argument was that the Protocol mentioned above was a contract
only between itself and CNR. The posting of application criteria was akin
to soliciting bids to apply. Under New York Law, a bid is an invitation
to make an offer. Thus ADM’s application was actually (in GGYC’s
view) an offer to join the competition. Since GGYC actually rejected ADM’s
application, there was no (in GGYC’s opinion) acceptance and thus
a valid contract never existed. If no valid contract existed, the court
must dismiss the case.

ADM had a different interpretation, illustrative of the kind of issues
that commonly arise in contracts cases. ADM viewed the Protocol as an
offer to ALL yacht clubs, and the submission of an application satisfying
the criteria in the Protocol was its own acceptance. So the case hinges
on the question of whether ADM’s application was actually an offer
or an acceptance.

The Decision

The court decided that ADM did make a case for a contract existing. Under
Sargent v. NY Daily News, the rules of a contest do constitute a contract
offer and the participant’s entry into the contest constitutes an
acceptance. The court then remanded the case back to the lower courts
to determine whether a breach of contract occurred.

If you have any questions about situations where a contract may exist,
including a contest or sweepstakes, or any other concerns about a potential
breach of contract, it is important to retain an experienced attorney
who understands contract law and breach of contract claims. Please do
not hesitate to contact
our office for a consultation.